Open

Coming up

Don't miss

Replay


LATEST SHOWS

MEDIAWATCH

No strategy and a beige suit

Read more

THE WORLD THIS WEEK

The World This Week - 29 August 2014 (part 2)

Read more

THE WORLD THIS WEEK

The World This Week - 29 August 2014

Read more

ENCORE!

Alain Choquette: A Hilarious Magician in Paris

Read more

FOCUS

France welcomes Iraqi Christian refugees

Read more

FRANCE IN FOCUS

Emmanuel Macron: A new economy minister with a pro-business agenda

Read more

THE OBSERVERS

More of this year's best Observers stories

Read more

#TECH 24

Changing the world, one video game at a time

Read more

IN THE PAPERS

Socialist Party summer conference kicks off in explosive atmosphere

Read more

  • EU leaders choose Tusk and Mogherini for top jobs, discuss Russia sanctions

    Read more

  • Dozens of UN peacekeepers still held by Syrian jihadists

    Read more

  • Opposition protesters clash with Pakistani police outside PM's house

    Read more

  • Austerity row overshadows French Socialist’s annual rally

    Read more

  • Egypt sentences Brotherhood leader Badie to life

    Read more

  • Ceasfire allows Gaza families to relax on the beach

    Read more

  • S. Africa condemns 'military coup' in Lesotho

    Read more

  • Kerry calls for 'coalition of nations' to battle IS militants

    Read more

  • Ukrainian plane with seven on board crashes in Algeria

    Read more

  • Exclusive: Fabius warns Russia of more sanctions

    Read more

  • IMF backs Lagarde amid French corruption probe

    Read more

  • Ebola drug ‘ZMapp’ heals all monkeys in study

    Read more

  • British killer escapes from French psychiatric hospital

    Read more

  • Police hunt for British boy with brain tumour taken to France

    Read more

  • Ukraine to relaunch NATO membership bid

    Read more

  • Suriname leader’s son pleads guilty to courting Hezbollah

    Read more

  • Mapping Ukraine: Canada and Russia in ‘tweet for tat’ row

    Read more

Europe

European stocks head lower on Standard & Poor's warning

Text by News Wires

Latest update : 2011-12-06

European markets and the euro fell Tuesday following Standard & Poor's warning of an imminent eurozone downgrade. The ratings agency's statement effectively ended the rally in global equities that had taken place in recent days.

REUTERS - European stocks, bond futures, and the euro were sent reeling on Tuesday by the shock warning from Standard & Poor's that it might downgrade euro zone countries en masse if no credible plan to solve the debt crisis emerges at a summit later this week.

The unprecedented warning also brought to a halt a rally inglobal equities that began last week and had continued onMonday, with the MSCI world equity index down 0.6 percent.

European stocks as measured by the FTSEurofirst 300 opened nearly 0.7 percent lower, off a five-week high struck in the previous session.

"S&P appear a bit like a comic book villain. You can almost hear them shouting "we will destroy you all, ha ha ha ha," said Gary Jenkins of Evolution Securities.

In the debt market the news sent December Bund futures 21 ticks lower at 134.61, but benchmark 10-year yields were flat at 2.16 percent.

The euro saw a decisive move lower against the dollar, faling 0.4 percent to around $1.3351. But given most investors were already fearful about the prospects for the single currency, the risk of a massive sell-off was seen limited, for now.

Downgrade threat

S&P said it had told 15 of the 17 euro zone countries, including Germany, France and four others with the top AAA credit rating, that it might downgrade them within 90 days, depending on the outcome of Friday's summit.

The warning took the sheen off a Franco-German agreement, which the two nation plan to put before other member states on Friday, to impose budget discipline across the currency area through European Union treaty changes.

Elsewhere, the IMF approved a 2.2 billion euro ($3 billion) tranche of aid for Greece which was seen as taking the threat of an imminent default off the table. While the Reserve Bank of Australia, citing Europe's woes as a key factor, cut interest rates by 25 basis points and left the door open for more easing.

The RBA move put perceived riskier currencies under further pressure, with the Australian dollar itself falling nearly 1 percent to near $1.016.

Commodities, particularly those most sensitive to industrial demand expectations, were mostly lower.

Standard & Poor's said ratings could be lowered by one notch for Austria, Belgium, Finland, Germany, the Netherlands and Luxembourg, and by up to two notches for the remaining nine placed under review, including currently AAA-rated France.

S&P's warning came after a Franco-German initiative, to be discussed at the Friday summit, to impose budget discipline across the euro zone through treaty changes.

"If Germany loses its triple-A status, there could well be forced selling of Bunds, and Treasuries and Gilts will be the beneficiaries," said a trader.

"There's also the EFSF (euro zone rescue fund), if France and Germany are downgraded it definitely loses its triple-A rating."

Date created : 2011-12-06

  • EUROZONE

    Sarkozy, Merkel to push for new European Union treaty

    Read more

  • ECONOMY

    Another emergency summit to save the eurozone

    Read more

COMMENT(S)